Has Take Two’s (TTWO) Stock Found a Bottom?

Take Two (TTWO) Looks to End Downtrend After Developing A Double Bottom

Despite blowing away analyst estimates during their most recent quarter, Take Two Interactive (TTWO) stock is down 5% since reporting, flat from where I recommended purchasing shares in anticipation of stronger than expected Grand Theft Auto V sales. I still view TTWO as a strong long-term buy, and believe their downside is very limited from their current levels given their massive cash position and extremely valuable intellectual property portfolio. Both Microsoft’s (MSFT) Xbox One and Sony’s (SNE) PlayStation 4 sold over 1 million units on their release day, positive signs for the industry as a whole heading into the holiday season.

Looking at their chart we can see that Take Two has traded down sharply on the open the past two sessions, but bounced strongly off of the $16.35 level and recouped their initial losses each day, forming a very defined double bottom pattern. Shares could run into some resistance at $17, but a move above that level would confirm their short-term reversal and set the stage for a move higher. Take Two shares are currently at a very attractive entry point and I believe $16.35 will prove to be the floor for TTWO’s stock price moving forward.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

2 Responses to Has Take Two’s (TTWO) Stock Found a Bottom?

I think that most of what you’re saying correct, but I can’t help but wonder… what is even causing it to drop in the short run. Shouldn’t the short run flux correlate strongly with the companies long term value? Why are analysts downgrading the stock if there is strong long term potential. http://finance.yahoo.com/q/ao?s=TTWO

Surely, there must be some reason that this stock is not steadily rising? Do they have a long term value proposition? What would stop a competitor from entering the market? Are they even worth their current valuation?

Hard to say what is causing the short-term drop, but having followed TTWO for more than 8 years now, their stock after reacts irrationally in the short-term to what would appear to be positive news. The same analyst who downgraded Monday also expected TTWO to report they had sold 18 million copies of GTA V last quarter, he was off by 11 million units, his opinion on TTWO should be irrelevant to any rational person. Their long-term value lies in the value of their portfolio of intellectual property and massive cash position. Competitors should be expected to enter and enter their market, but people play multiple video games and as long as Take Two continues to produce hit games as they’ve been doing for the past decade, they will continue to sell well. Grand Theft Auto, BioShock, Red Dead Revolver, Max Payne, Borderlands, and NBA 2k are some of the most valuable brands in the industry and are what make TTWO a worthy long-term investment.